Care homes sought review of a rate set by the Defendant local authority. The rate in question was that related to the “usual cost” cost of residential care, which the authority would expect to pay. The owners of the care homes argued that the Defendant had failed to properly take into account the actual cost of care when considering return of capital in setting the “usual cost” rate. The Court dismissed the application. The Defendant was not compelled to follow any particular method when setting the rate.

21 April 2015

Administrative Court

HHJ Stephen Davies

1. Care homes sought review of a rate set by the Defendant local authority. The rate in question was that related to the “usual cost” cost of residential care, which the authority would expect to pay. Statutory guidance directed that authorities should set the rate in line with their usual costs at the commencement of each financial period and that, in doing so, the authorities ought to take into account the actual costs of care provision. A part of the actual costs of care are the rate of return of monies invested. The local authority carried out this calculation using a mix of mathematics and judgment based upon experience.

ISSUE:

2. The owners of the care homes argued that the Defendant had failed to properly take into account the actual cost of care when considering return of capital in setting the “usual cost” rate.

DETERMINATION:

3. The Court dismissed the application.

4. The Defendant was not compelled to follow any particular method when setting the rate. The Court in R. (on the application of Members of the Committee of Care North East Northumberland) v Northumberland CC [2013] EWCA Civ 1740 [2014] P.T.S.R. 758 dismissed the idea that there should be a rigid line drawn between the actual and usual costs of care. The Court would not interfere on the basis that an error of fact may have occurred. Moreover, the Defendant did take into account the return on capital. The fact the authority decided to calculate the rate in a way that involved mathematics did not mean they had to do so in any particular fashion. The Court also noted that opinions on what is the correct rate could legitimately differ.

Key Paragraphs

[19]-[23] – Any inquiry prior to the setting of the rate is a matter for the local authority.

[57] - Defendant had taken into account return on Capital Investments.